Bruker Reports Third Quarter 2018 Financial Results

Bruker's revenues for the third quarter of 2018 were $466.6 million, an increase of 7.1% compared to the third quarter of 2017. In the third quarter of 2018, Bruker's year-over-year organic revenue growth was 7.0%. Growth from acquisitions was 1.5%, while foreign currency translation had a negative effect of 1.4%.

Third quarter 2018 Bruker Scientific Instruments (BSI) segment revenues of $417.1 million increased 6.8%, compared to the third quarter of 2017, including organic growth of 6.5%. Third quarter 2018 BEST segment revenues of $50.9 million increased 10.4%, compared to the third quarter of 2017, including organic growth, net of intercompany eliminations, of 11.1%.

Third quarter 2018 GAAP operating income was $69.1 million, compared to $51.3 million in the third quarter of 2017. Non-GAAP operating income was $83.3 million, compared to $65.8 million in the third quarter of 2017. On a non-GAAP basis, Bruker's third quarter 2018 operating margin of 17.9% increased 280 basis points compared to 15.1% in the third quarter of 2017. Strong operating leverage, favorable product mix and operational improvements contributed to the year-over-year margin increase.

Third quarter 2018 GAAP diluted earnings per share (EPS) were $0.28, an increase of 21.7% compared to $0.23 in the third quarter of 2017. Third quarter 2018 non-GAAP diluted EPS were $0.37, an increase of 27.6% compared to $0.29 in the third quarter of 2017.

For the first nine months of 2018, Bruker's revenues increased 8.6% to $1,342.0 million, from $1,235.4 million in the first nine months of 2017. In the first nine months of 2018, Bruker's year-over-year organic revenue growth was 4.7%. Favorable foreign currency translation contributed 3.0% to revenue growth, while growth from acquisitions was 0.9%.

In the first nine months of 2018, BSI segment revenues of $1,206.5 million increased 9.7%, compared to the first nine months of 2017, including organic growth of 5.8%. BEST segment revenues in the first nine months of 2018 of $139.2 million declined 0.7%, compared to the first nine months of 2017, including an organic decline, net of intercompany eliminations, of 4.8%.

In the first nine months of 2018, GAAP operating income was $156.0 million, compared to $124.2 million in the first nine months of 2017. Non-GAAP operating income was $195.1 million, compared to $168.5 million in the first nine months of 2017. On a non-GAAP basis, Bruker's operating margin in the first nine months of 2018 of 14.5% increased 90 basis points, compared to 13.6% in the first nine months of 2017. During the first nine months of 2018, volume leverage and operational improvements more than offset a strong unfavorable impact from changes in foreign currency rates on operating margins, which occurred primarily in the first half of the year.

In the first nine months of 2018, GAAP EPS were $0.65, an increase of 27.5% compared to $0.51 in the first nine months of 2017. Non-GAAP EPS for the first nine months of 2018 were $0.86, an increase of 22.9% over $0.70 in the first nine months of 2017.

A reconciliation of non-GAAP to GAAP financial measures is provided in the tables accompanying this press release.

Frank Laukien, President and CEO of Bruker, commented: "Bruker had a solid third quarter with 7.0% organic revenue growth and a notable year-over-year step-up in operating margin. Given our year-to-date results, as well as our healthy year-over-year bookings growth, we are updating our guidance for the year."

Dr. Laukien continued: "Bruker has been accelerating its organic revenue growth, and we are encouraged by the further progress in many of our Project Accelerate high-growth, high-margin initiatives this year. I am also very pleased with our operational excellence improvements, which are a testament to our effective management process and capable leadership team."

Fiscal Year (FY) 2018 Financial Outlook

For FY 2018, the Company now expects year-over-year revenue growth of 6.5% to 7.0%, including the following updates compared to our previous outlook as issued on August 2, 2018:

For the Company's outlook for FY 2018 non-GAAP operating margin and non-GAAP EPS, we are not able to provide without unreasonable effort the most directly comparable GAAP financial measures, or reconciliations to such GAAP financial measures on a forward-looking basis. Please see "Use of Non-GAAP Financial Measures" below for a description of items excluded from our expected non-GAAP operating margin and non-GAAP EPS.

Quarterly Earnings Call

Bruker will host a conference call and webcast to discuss its financial results, business outlook, and related corporate and financial matters today at 4:30 p.m. Eastern Daylight Time. To listen to the webcast, investors can go to https://ir.bruker.com and click on the "Events & Presentations" hyperlink. A slide presentation that will be referenced during the webcast will be posted to the Company's website shortly before the webcast begins. Investors can also listen to the earnings webcast via telephone by dialing 1-888-437-2685 (US toll free) or +1-412-317-6702 (international), and referencing "Bruker's Third Quarter 2018 Earnings Conference Call". A telephone replay of the conference call will be available by dialing 1-877-344-7529 (US toll free) or +1-412-317-0088 (international) and entering conference number: 10125757. The replay will be available beginning one hour after the end of the conference through December 1, 2018.

About Bruker Corporation

Bruker is enabling scientists to make breakthrough discoveries and develop new applications that improve the quality of human life. Bruker's high-performance scientific instruments and high-value analytical and diagnostic solutions enable scientists to explore life and materials at molecular, cellular and microscopic levels. In close cooperation with our customers, Bruker is enabling innovation, improved productivity and customer success in life science molecular research, in applied and pharma applications, in microscopy and nanoanalysis, and in industrial applications, as well as in cell biology, preclinical imaging, clinical phenomics and proteomics research and clinical microbiology. For more information, please visit: www.bruker.com.

We also refer to organic revenue growth and free cash flow in this press release or on the earnings webcast, which are also non-GAAP financial measures. We define the term organic revenue as GAAP revenue excluding the effect of changes in foreign currency translation rates and the effect of acquisitions and divestitures, and believe it is a useful measure to evaluate our continuing business. We define free cash flow as net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business because it indicates the amount of cash generated after additions to property, plant, and equipment that is available for, among other things, acquisitions, investments in our business, repayment of debt and return of capital to shareholders.

The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies. We believe these non-GAAP financial measures provide meaningful supplemental information regarding our performance. Specifically, management believes that the non-GAAP measures mentioned above provide relevant and useful information which is widely used by analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance.

We use these non-GAAP financial measures to evaluate our period-over-period operating performance because our management believes this provides a more comparable measure of our continuing business by adjusting for certain items that are not reflective of the underlying performance of our business. These measures may also be useful to investors in evaluating the underlying operating performance of our business and forecasting future results. We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities.

Additional information relating to these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures is provided in the tables accompanying this press release following our GAAP financial statements and in our slide presentation, which is available through the "Bruker Earnings Release" hyperlink on Bruker's Investor Relations web site ir.bruker.com.

With respect to the Company's outlook for 2018 non-GAAP operating margin, non-GAAP EPS and non-GAAP tax rate, we are not providing the most directly comparable GAAP financial measures or corresponding reconciliations to such GAAP financial measures on a forward-looking basis, because we are unable to predict with reasonable certainty certain items that may affect such measures calculated and presented in accordance with GAAP without unreasonable effort. Our expected non-GAAP operating margin, tax rate and EPS ranges exclude primarily the future impact of restructuring actions, unusual gains and losses, acquisition-related expenses and purchase accounting fair value adjustments. These reconciling items are uncertain, depend on various factors outside our management's control and could significantly impact, either individually or in the aggregate, our future period operating margins, EPS and tax rate calculated and presented in accordance with GAAP.

Forward Looking Statements

Any statements contained in this press release which do not describe historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on current expectations, but are subject to risks and uncertainties that could cause actual results to differ materially from those indicated, including, but not limited to, risks and uncertainties relating to adverse changes in conditions in the global economy and volatility in the capital markets, the integration of businesses we have acquired or may acquire in the future, fluctuations in foreign currency exchange rates, our ability to successfully implement our restructuring initiatives, changing technologies, product development and market acceptance of our products, the cost and pricing of our products, manufacturing, competition, dependence on collaborative partners, key suppliers and contract manufacturers, capital spending and government funding policies, changes in governmental regulations, the use and protection of intellectual property rights, litigation, and other risk factors discussed from time to time in our filings with the Securities and Exchange Commission, or SEC. These and other factors are identified and described in more detail in our filings with the SEC, including, without limitation, our annual report on Form 10-K for the year ended December 31, 2017 and subsequently filed Quarterly Reports on Form 10-Q. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.

(1)The Company adopted Accounting Standards Update (ASU) 2017-07 as of January 1, 2018 under the retrospective approach. Accordingly, the 2017 income statement accounts have been restated to reflect ASU 2017-07.

Bruker Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three Months Ended

Nine Months Ended

(in millions)

September 30,

September 30,

2018

2017

2018

2017

Cash flows from operating activities:

Consolidated net income (loss)

$ 44.2

$ 37.6

$ 103.1

$ 83.3

Adjustments to reconcile consolidated net income to cash flows

from operating activities:

Depreciation and amortization

15.9

17.1

48.3

48.2

Stock-based compensation expense

3.3

3.1

8.2

8.4

Deferred income taxes

(1.2)

(2.8)

(8.6)

(5.0)

Other non-cash expenses, net

3.9

4.3

28.7

6.1

Changes in operating assets and liabilities, net of acquisitions and divestitures:

(1)The Company adopted Accounting Standards Update (ASU) 2017-07 as of January 1, 2018 under the retrospective approach. Accordingly, the 2017 income statement accounts have been restated to reflect ASU 2017-07.

The Company adopted Accounting Standards Codification (ASC) 606 as of January 1, 2018 under the modified retrospective approach. Accordingly, the 2017 revenue amounts have not been restated to reflect ASC 606 and are presented for informational purposes only.

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